2026-VIL-576-ALH
  1. Home
  2. 2026-VIL-576-ALH

SGST High Court Cases

GST - Mandatory nature of Form DRC-01A notice, Right to settle tax demand at reduced penalty before issue of SCN – Petitioner-assessee is issued a show cause notice on Form DRC-01 for alleged wrongful availment of input tax credit but no prior notice on Form DRC-01A was communicated to the assessee as required under Rule 142(1A) of the CGST Rules 2017 - Petitioner sought adjudication of dispute against reduced penalty of 15% as against full penalty demand - Whether the issuance of Form DRC-01A notice prior to serving the show cause notice under section 73 or section 74 of the CGST Act, 2017 is mandatory, and whether an assessee can claim the benefit of section 74(5) of the Act to settle the disputed demand at a reduced penalty of fifteen percent even when such prior notice is not issued – HELD - The provisions of section 74(5) of the CGST Act read with Rule 142(1A) of the CGST Rules are mandatory in nature to the extent that no demand of penalty higher than 15% percent may be raised in the first place - Although Rule 142(1A) uses the word "may," this must be interpreted consistently with the principal Act which prescribes clear consequences flowing from Section 74(5) providing an option to an assessee to pay the short-paid tax along with interest and only 15% penalty before service of SCN, as against the higher penalty of 25% payable upon issuance of formal SCN. The word "may" in the Rule cannot be read to mean the provision is merely discretionary. To read Rule 142(1A) as directory would create an impermissible conflict between the principal Act and subordinate Rules - Further, an assessee remains entitled to claim the benefits of Section 74(5) up to the stage of filing a reply to the SCN on Form DRC-01 and this right stands eclipsed only where the noticee chooses to dispute liability without claiming such right. The statutory intent to give mandatory effect to these provisions is evidenced by the differentiated penalty structure. Procedural Rules exist to give effect to the statutory scheme created by the principal legislature and can never be read to carve out a different scheme - The assessee is directed to pay the disputed demand along with interest and 15% penalty and the adjudication order shall stand satisfied on such payment, with the amount being treated as computed on the date of issuance of DRC-01A notice – The writ petition is allowed
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Weekly Summary

VIL Video

GST Recent Updates: GSTAT, EWB...
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Security-Code
New Code?

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Security-Code
New Code?

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?